Responding to Duck Tales

Like any mischievous creature, DONALD DUCK is no exception. Yesterday he made another appearance and we knew then that he was very selective to whom he speaks to. For some reason he chooses to be in the Chinese medium, so this time he preferred to bask in the comfort zone offered by the Oriental Daily News.

As in the previous occasion, the MCA owned news agency, The Star, had ignored in picking up his story. Strange though because The Star used to be very eager to report anything about Genneva Malaysia and the newspaper won’t miss any chance to run it to the ground.

Whether significant or not, let’s see what the duck had to say. For people who can’t read Chinese, this article breaks down his quotes which are then translated into English. Note that translation is not 100% but close enough to be understood.

1. The Duck says:- “Gold is still one of the most reliable investment portfolios to have and for this he attributed to a host of reasons including the instability of major currencies including the US Dollar, the unresolved international debts, the Chinese RMB, etc. He quoted the world gold stocked up 170,000 tons worth about $500 billion with China and India being the major gold consumer. He said the Ministry of Finance had begun preparations last year for the establishment of a gold trading platform and for this a Mercantile Exchange shall be set up that is going to follow similar blueprint as the Hong Kong Gold Exchange. He says if all goes well, this plan is expected to be finalized by September 2013. The Mercantile Exchange will be place under the Malaysian Securities Commission who will then supervise the sale and purchase of gold. It will provide a secure investment platform for investors and he believes it can attract Southeast Asian investors”.

Comment: Duck’s message is plain and simple, gold is the way to go and his government is aware of this. By his very own words, the duck has spilled the beans. His government has big plans and ambition for the gold trading industry, enough so to set up a Mercantile Exchange. Only problem facing them is Genneva Malaysia Sdn Bhd (GMSB) because unlike any other seen before, GMSB has a solid footing in this industry with at least 5 to 6 years ahead in lead time. It is truly a market leader in this field and as such GMSB is standing in the way of the government’s ambition.

Once the Mercantile Exchange is formed, the government through the Malaysian Securities Commission is able to play the game in any which way they want and of course licenses would only go to crony controlled parties.

But it is not easy for any newcomer to penetrate such market if GMSB has already cornered a sizeable market share in virtually the whole of Malaysia including the eastern states of Sabah and Sarawak. So it is not stretching one’s imagination to say that the government requires (or perhaps even ordered) its watchdog, BNM, to clean up the industry as it is still unregulated up to the present day. As he said, the only way is to ban them literally. For achieving this they will not hesitate to use any tool available in any which way they can.

We all know of course that they are only good at sticking to the usual tried and tested way, i.e. to drum up some charges under the AMLATFA or BAFIA and see whether any sticks. It is the same way as how they wanted to stick sodomy charges up somebody’s ass one too many times. Sadly for them there is a saying that if you cried wolf too many times, your credibility goes rolling downhill, all the way.

Interestingly though the government has opened itself to conflict of interest. It has stripped its intention bare for all to see and if so any judge in a judicial review would have no trouble whatsoever spotting the naked allegations against GMSB a mile away. Of course to concerned Gennevarians that prospect is still a small cause to celebrate.

On the same note, there is wind circulating around that the duck has taken flight overseas to sniff out big gold players with the objective of laying the foundation for them to set up shop domestically. Click to view Photo 1 and Photo 2.

If that has any element of truth in it, then it is not wrong to say that such a policy is contradictory of PM Najib’s objective of nurturing home grown entrepreneurs to lead the way in contributing to the domestic GDP. Remember PM Najib’s eight strategic reform initiatives that he said Malaysia would be focused on? In case the duck does not remember, they are:

Re-energising the private sector to lead growth;

Developing a quality workforce and reducing dependency on foreign labour;

Creating a competitive domestic economy;

Strengthening the public sector;

Putting in place transparent and market-friendly affirmative action;

Building knowledge based infrastructure;

Enhancing the sources of growth; and

Ensuring sustainability of growth.

To cut off domestic players such as Genneva Malaysia and to make way for foreign ones so that the government may glorify itself by claiming success in “attracting Southeast Asian investors” into the country under a Mercantile Exchange platform seems not only foolish but anti-patriotic too as it undermines home grown entrepreneurship at the expense of political expediency.

2. The Duck says: BNM has appointed two audit companies, KPMG (KPMG) and Pricewaterhouse Coopers (PwCooper) to assess and audit GMSB’s assets and liabilities.

Comment: A lot of people would agree that this story is stretching one’s imagination too far. Logic begs the question as to the need to appoint the world’s two major audit houses to do the same job. If what he says has any truth in it, is this going to be a case where too many cooks spoil the broth?

Or is BNM not going to be bothered whether the end result is broth or soup because either way, they have orders to wipe out GMSB as per reason given in (1) above?

3. The Duck says: According to the preliminary report from BNM, GMSB loss RM757 million in 2011, and that loss further increased to RM1.6 billion in September 2012. At the same time, GMSB has liabilities of RM14billion, but only has RM111.3 million assets. He says the report also points out that relative to GMSB’s cash and gold reserves, the possibility is very low that GMSB can meet its obligation to pay back its customers’ cash and gold.

Comment: The duck is still continuing to spin the same old story, with the exception that he spiced up the liability from RM10 billion to now RM14 billion. A little bird told me that in 2011 GMSB not only didn’t make any losses but paid quite some hefty income tax to Inland Revenue. With Judicial Review in place, we will be able to find out just how much tax GMSB paid in 2011, won’t we? I believe once we exposed a single lie, all other lies will naturally be purged too.

4. The Duck says: If BNM had not immediately interfered, GMSB gold investment plan in 2012 may lead to more victims where it is estimated that the number involved may reach 14 million people; and the amount of investment with the trend as calculated has a total investment of more than 30 billion ringgit.

Comment: What duck says is purely conjecture and hypothesis. In fact his statement is rather contradictory and flimsy. Let’s examine what he said. On the one hand, he said in paragraph (3) above that GMSB made severe losses in 2011 (RM757 million) and even greater losses in 2012 (RM1.6 billion). But on the other hand, he said had BNM not stopped GMSB on 1st October 2012, the company would have got 14 million more victims who would have poured in a total investment of more than RM30 billion.

These allegations simply do not add up and anyone could see through that. If it is true the company had already gone broke in 2011, how did it manage to grow exponentially in 2012 to reach a total customer base of about 60,000 people? Wouldn’t it be the reverse case if I say that the company being bogged down by a hefty loss of RM757 million in 2011 could not have possibly survived year 2012 let alone being able to scam another 14 million victims if not for BNM’s intervention? Is his story convincing to you? If not then I’d say let the court be the judge of that.

5. The Duck says: The report also found that some people involved in money laundering activities through such investments.

Comment: There is nothing very much GMSB can do about it because every purchaser who comes along literally pays cash to buy the gold from the company. Is it practical for BNM to place the onus on GMSB to verify the source of money pertaining to each of its customers?

Bringing comparison of this issue with the instance where some people buying stocks or shares from KLSE (or Bursa Saham), is it fair to impose the burden on Bursa Saham to check and verify that each client who buys equity from the market is not involved in money laundering activities and does not bring in dirty money into the system?

Is there any system that can be put in place with such efficiency in the first place? Is BNM prepared to raid Bursa Saham, cease its operations for months and find out through a lengthy audit how many people are involved in money laundering activities? Would you not expect Bursa Saham to be pleading the same mercy as what GMSB is doing now?